What is Gainsharing? The Basics
Gainsharing is a literal term. As an organization gains, it shares. The
typical Gainsharing organization measures performance and through a
pre-determined formula shares the savings with all employees. The
organization's actual performance is compared to baseline
performance (often a historical standard) to determine the amount of
the gain. Since gains are measured in relationship to a historical
baseline, employees and the organization must change in order to
generate a gain. Typical elements of a Gainsharing plan include the
- Gains and resulting payouts are self-funded.
- The plan commonly applies to a single plant, site, or stand-alone
organization. However, some organizations have levels of sharing across
multiple locations or corporation-wide.
- Performance is typically measured across departments/units/functions.
- Measures are commonly narrower and controllable by employees rather
than being an organization-wide measure of profits. However, some
organizations have measures as broad as profits.
- Payout is often monthly or quarterly.
- Many plans have a year-end reserve fund to account for deficit periods.
- Employees are involved with the design process.
- All employees are eligible for plan payments.
- The bonus is often paid as an equal percentage of compensation or equal
cents per hour worked, rather than paid on the basis of individual
- A supporting employee involvement system is part of the plan in order to
drive improvement initiatives.